The core ad metrics, and how they connect
Every paid campaign on Google, Meta, TikTok or Amazon runs through the same funnel: people see the ad (impressions), some click, and some of those convert. Each metric measures one step, so they can be converted into each other.
| Metric | Formula | What it tells you |
|---|---|---|
| CPM | Spend ÷ Impressions × 1,000 | How expensive your audience is |
| CTR | Clicks ÷ Impressions | How well the ad grabs attention |
| CPC | Spend ÷ Clicks | What each visit costs you |
| Conversion rate | Conversions ÷ Clicks | How well your landing page sells |
| CPA | Spend ÷ Conversions | What each customer or lead costs |
| ROAS | Revenue ÷ Spend | Sales returned per dollar of ads |
CPC = CPM ÷ (CTR × 1,000)
CPA = CPC ÷ Conversion rate
Worked example
You spend $500 for 100,000 impressions and get 2,000 clicks and 40 sales worth $2,000. CPM is $5, CTR is 2%, CPC is $0.25. Conversion rate is 40 ÷ 2,000 = 2%, so CPA is $0.25 ÷ 0.02 = $12.50. ROAS is $2,000 ÷ $500 = 4x.
Which metric to fix first
- High CPM, normal CTR: your audience is expensive or crowded. Test broader targeting or other placements.
- Low CTR: the creative or offer isn’t landing. Test new hooks, images and headlines before changing anything else.
- Good CTR, low conversion rate: the ad works but the page doesn’t. Check page speed, price clarity and that the page matches the ad’s promise.
- Good everything, still no profit: your CPA is above what a customer is worth. Compare it with your break-even ROAS and customer lifetime value.
Frequently asked questions
What is the difference between CPC and CPM?
CPC is what you pay for each click. CPM is what you pay for every 1,000 times your ad is shown. They are linked by click-through rate: CPC = CPM ÷ (CTR × 1,000).
How do I calculate CTR?
Divide clicks by impressions and multiply by 100. 2,000 clicks from 100,000 impressions is a 2% CTR.
How do I calculate CPA?
Divide total ad spend by the number of conversions. $500 spend for 40 sales is a $12.50 CPA.
What is a good CTR?
It depends heavily on platform, placement and industry. Compare against your own past campaigns first: a rising CTR at stable CPM means cheaper clicks.
Is ROAS the same as ROI?
No. ROAS is revenue divided by ad spend. ROI also subtracts product costs and other expenses, so a 3x ROAS can still lose money if your margins are thin.